Foreclosure Prevention Workshop for Homeowners Daytona Beach, Florida

Are you late on your mortgage?
Fight For Your Home!!

Workshop: Tuesday, December 9th, 2008
Time: 5:00 pm – 6:45 pm

Where: City Island Library
105 E. Magnolia Ave
Daytona Beach, FL

Open to the Public, Come and Learn how to Save Your Home and Avoid Foreclosure!

Tuesday December 16, 2008

7:00 pm – 8:30pm
The Learning Center of South Park

7350 Futures Drive Ste 6
Orlando , Fl. 32819

Additional information from IRS of extending the program into the year 2012 with links to IRS forms and more articles with FAQ’s at midway of this page.

Direct Link to IRS for the Mortgage Forgiveness Debt Relief Act of 2007

The Mortgage Forgiveness Debt Relief Act of 2007 was enacted on December 20, 2007 (see News Release IR-2008-17). Generally, the Act allows exclusion of income realized as a result of modification of the terms of the mortgage, or foreclosure on your principal residence.

What does that mean?
Usually, debt that is forgiven or canceled by a lender must be included as income on your tax return and is taxable. The Mortgage Forgiveness Debt Relief Act of 2007 allows you to exclude certain canceled debt on your principal residence from income.

Does the Mortgage Forgiveness Debt Relief Act of 2007 apply to all forgiven or canceled debts?
No, the Act applies only to forgiven or cancelled debt used to buy, build or substantially improve your principal residence, or to refinance debt incurred for those purposes.

What about refinanced homes?
Debt used to refinance your home qualifies for this exclusion, but only up to the extent that the principal balance of the old mortgage, immediately before the refinancing, would have qualified.

Does this provision apply for the 2007 tax year only?
It applies to qualified debt forgiven in 2007, 2008 or 2009.

If the forgiven debt is excluded from income, do I have to report it on my tax return?
Yes. The amount of debt forgiven must be reported on Form 982 and the Form 982 must be attached to your tax return.

Do I have to complete the entire Form 982?
Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Adjustment), is used for other purposes in addition to reporting the exclusion of forgiveness of qualified principal residence indebtedness. If you are using the form only to report the exclusion of forgiveness of qualified principal residence indebtedness as the result of foreclosure on your principal residence, you only need to complete lines 1e and 2. If you kept ownership of your home and modification of the terms of your mortgage resulted in the forgiveness of qualified principal residence indebtedness, complete lines 1e, 2, and 10b. Attach the Form 982 to your tax return.

Where can I get this form?
You can download the form at IRS.gov, or call 1-800-829-3676. If you call to order, please allow 7-10 days for delivery.

How do I know or find out how much was forgiven?
Your lender should send a Form 1099-C, Cancellation of Debt, by January 31, 2008. The amount of debt forgiven or cancelled will be shown in box 2. If this debt is all qualified principal residence indebtedness, the amount shown in box 2 will generally be the amount that you enter on lines 2 and 10b, if applicable, on Form 982.

Can I exclude debt forgiven on my second home, credit card or car loans?
Not under this provision. Only canceled debt used to buy, build or improve your principal residence or refinance debt incurred for those purposes qualifies for this exclusion.

If part of the forgiven debt doesn’t qualify for exclusion from income under this provision, is it possible that it may qualify for exclusion under a different provision?
Yes. The forgiven debt may qualify under the “insolvency” exclusion. Normally, a taxpayer is not required to include forgiven debts in income to the extent that the taxpayer is insolvent. A taxpayer is insolvent when his or her total liabilities exceed his or her total assets. The forgiven debt may also qualify for exclusion if the debt was discharged in a Title 11 bankruptcy proceeding or if the debt is qualified farm indebtedness or qualified real property business indebtedness. If you believe you qualify for any of these exceptions, see the instructions for Form 982.

Is there a limit on the amount of forgiven qualified principal residence indebtedness that can be excluded from income?
There is no dollar limit if the principal balance of the loan was less than $2 million ($1 million if married filing separately for the tax year) at the time the loan was forgiven. If the balance was greater, see the instructions to Form 982, page 4.

Is there anything else I need to know before filing?
Yes. Because the Mortgage Forgiveness Debt Relief Act of 2007 was passed so late in the year, the software systems used by tax preparers and at the Internal Revenue Service need to be updated to accept the revised Form 982. The IRS expects to be able to process the new Form 982 electronically on March 3, 2008.

ADDITIONAL INFORMATION FROM IRS FOR THE YEAR 2008 – 2012 EXTENSION:

DIRECT LINK TO IRS ARTICLE

Updated with FAQs at bottom — Feb. 28, 2008
Updated with new link — Dec. 11, 2008

IR-2008-17, Feb. 12, 2008

WASHINGTON — Homeowners whose mortgage debt was partly or entirely forgiven during 2007 may be able to claim special tax relief by filling out newly-revised Form 982 and attaching it to their 2007 federal income tax return, according to the Internal Revenue Service.

Normally, debt forgiveness results in taxable income. But under the Mortgage Forgiveness Debt Relief Act of 2007, enacted Dec. 20, taxpayers may exclude debt forgiven on their principal residence if the balance of their loan was $2 million or less. The limit is $1 million for a married person filing a separate return. Details are on Form 982 and its instructions, available now on this Web site.

“The new law contains important provisions for struggling homeowners,” said Acting IRS Commissioner Linda Stiff. “We urge people with mortgage problems to take full advantage of the valuable tax relief available.”

The late-December enactment means that reporting procedures for this law change were not incorporated into tax-preparation software or IRS forms. For that reason, people using tax software should check with their provider for updates that include the revised Form 982. Similarly, the IRS is now updating its systems and expects to begin accepting electronically-filed returns that include Form 982 by March 3. The paper Form 982 is now being accepted, but the IRS reminds affected taxpayers to consider filing electronically, which greatly reduces errors and speeds refunds.

The new law applies to debt forgiven in 2007, 2008 or 2009. Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, may qualify for this relief. In most cases, eligible homeowners only need to fill out a few lines on Form 982 (specifically, lines 1e, 2 and 10b).

The debt must have been used to buy, build or substantially improve the taxpayer’s principal residence and must have been secured by that residence. Debt used to refinance qualifying debt is also eligible for the exclusion, but only up to the amount of the old mortgage principal, just before the refinancing.

Debt forgiven on second homes, rental property, business property, credit cards or car loans does not qualify for the new tax-relief provision. In some cases, however, other kinds of tax relief, based on insolvency, for example, may be available. See Form 982 for details.

Borrowers whose debt is reduced or eliminated receive a year-end statement (Form 1099-C) from their lender. For debt cancelled in 2007, the lender was required to provide this form to the borrower by Jan. 31, 2008. By law, this form must show the amount of debt forgiven and the fair market value of any property given up through foreclosure.

The IRS urges borrowers to check the Form 1099-C carefully. Notify the lender immediately if any of the information shown is incorrect. Borrowers should pay particular attention to the amount of debt forgiven (Box 2) and the value listed for their home ( Box 7).

Note: Legislation enacted in October 2008 extended this relief through 2012. Thus this relief now applies to debt forgiven in calendar years 2007 through 2012.

* Frequently asked questions on the Mortgage Forgiveness Debt Relief Act
* Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness
* 1099-C
* Publication 4681, Canceled Debts, Foreclosures, Repossessions, and Abandonment

Step 0 – Delivery of the Promissory Note to Corresponding Institution
[This step may be OMITTED in the instance that a mortgage is originated by the primary mortgage servicer actually funding the loan at the table]

The mortgage loan is closed in the name of a small correspondent mortgage lender making the loan pursuant to a written commitment by the corresponding lender to purchase the loan immediately after closing. The corresponding lender FUNDS the loan at the table, usually by wiring the funds for the loan to the closing agent, typically a real estate attorney or a title company (this practice varies across the country). The corresponding lender is funding the particular loan it has agreed to purchase and the purchase price of the loan is set forth in the written commitment.

At the closing the borrower — the mortgagor — executes the promissory note and a mortgage or deed of trust security instrument.

Immediately following the closing the deed (if a purchase) and mortgage or deed of trust are RECORDED in the county records.

The promissory note is immediately ENDORSED over to the correspondent lender with an endorsement by the closing lender “Pay To [Name of Corresponding Lender]” signed [person] [Title] [Name of Closing Lender (Mortgagee)]. This endorsement is typically UNDATED.

The smaller lender also executes a mortgage assignment (UNLESS the mortgagee is MERS) and this assignment is typically contemporaneously recorded together with the mortgage or deed of trust.

The ENDORSED promissory note is delivered by overnight courier to the corresponding institution.

NEGOTIATION of a Promissory Note under the UCC is by ENDORSEMENT and DELIVERY.

At the conclusion of step ZERO, the Corresponding Lender OWNS the loan and has custody of the promissory note. The originating lender has fully disposed of all of its interest and has delivered both the promissory note and a recorded mortgage or deed of trust and assignment of that instrument.

Step 1 – Delivery of the Promissory Note to the Warehousing Lender
Where there is NOT a small originator making the loan and the mortgage servicer makes the loan ITSELF, the process BEGINS HERE. In this instance, the borrower is the maker of a promissory note and the grantor of a mortgage or deed of trust in favor of the originating servicer instead of the smaller correspondent.

The Corresponding Lender typically funds these loans using a revolving “warehousing line of credit” with a commercial bank. The corresponding lender gives the warehousing bank a security interest in the loans it is funding. The warehousing bank therefor typically expects to HOLD the promissory note as collateral for this warehousing loan.

Accordingly, the Corresponding Lender ENDORSES THE PROMISSORY NOTE IN BLANK and forwards the actual promissory note to EITHER the warehousing bank OR forwards the promissory note to an Institutional CUSTODIAN. In either case, the Corresponding Lender remains the OWNER of the promissory note pending its sale to a mortgage investor and the warehousing bank is the holder of the promissory note, which serves as collateral for its loan to the Corresponding Lender.

Step 2 – Delivery of the Promissory Note to a Mortgage Investor
At this point in the process there are four rather distinct paths that the mortgage ownership may take.

Variant A – Portfolioing the Loan
If the corresponding lender is a depository institution, particularly a thift institution, the corresponding institution may elect to portfolio the loan. That is the lender may choose to hold the closed loan as an investment. But this is VERY UNUSUAL in the case of fixed rate mortgages. Usually, depository institutions are gathering liabilities — deposits — with fairly SHORT maturities (e.g. 6 month CDs, 1 Year CDs, 2 Year CDs). There exists a great deal of interest rate pricing peril in funding long term maturities with short term deposits. It is BETTER to fund an asset with liabilities which reprice at intervals similar to the interest rate repricing characteristics of the asset.

As a consequence, ONLY adjustable rate mortgages tend to be portfolioed. Everything else is SOLD. And many adjustable rate mortgages are sold, as well.

In a portfolio situation, the corresponding institution may very well be also funding its own loans WITHOUT a warehousing lender. In this circumstance, the promissory notes MAY remain in the vaults of the corresponding institution.

Variant B – Selling the Whole Loan To Another Depository Institution
A second variant is similar to the first, however, the corresponding lender may SELL the loan to another depository entity that desires to portfolio this loan. The sale may be either servicing retained or servicing released. When servicing is retained, there will be a servicing agreemetn between the seller and the purchaser. With the sale, the corresponding lender would either deliver the promissory note to the purchaser OR have the warehousing lender deliver the promissory note to the purchaser OR have the institutional custodian EITHER deliver the promissory note to the purchaser OR deliver a custodial receipt to the purchaser and continue to act as custodian for the new entity.

A mortgage assignment would also need to be executed. At one time, ALL such assignments would have been recorded, but this no longer seems to be the case. When MERS is the nominee, this somewhat obviates the need to RECORD the assignment, but it does NOT absolve the seller of the need to timely execute an assignment.

Variant C – Sale or Exchange of the Mortgage for MBS with a GSE
A third variant is the sale or exchange of the mortgage for mortgage backed securities to a GSE (FNMA or FHLMC). In this instance, the promissory note is delivered either by the corresponding lender, the warehousing lender or the institutional cusdian directly to either FNMA or FHLMC or their designated custodian. Again, the institutional custodian holding the promissory note for either the corresponding lender OR the warehousing lender may effect delivery by simply delivering a custodial receipt to the GSE and then continue to hold the promissory note as custodian for the GSE.

Again, this transaction requires a written mortgage assignment. This assignment is typically NOT recorded and the corresponding lender would usually continue to act as a servicer for FNMA or FHLMC. Neither FNMA nor FHLMC services its own mortgages. All sales or excchanges with either of these GSE involve servicing retained transactions. The seller has entered into a seller – servicers agrreement with FNMA and FHLMC.

With the SALE or exchange of the promissory note, either the GSE or a TRUST set up by the GSE is the owner of the promissory note. Usually an institutional cusdian is the holder of the promissory note. The seller-servicer would almost NEVER be the holder during the routine servicing of the mortgage loan.

Variant D – Sale or Exchange of the Mortgage To a Private Conduit
Each of the major Wall Street investment banking concerns operates its own “private conduit” to purchase mortgage product for securitization. The larger mortgage companies therefore typically sell some of their production directly to these private conduits.

The private conduits traditionally served as outlet for so-called non-conforming mortgage product. These used to be mostly jumbo mortgages in excess of the FNMA and FHLMC loan limits OR loans that otherwise did not meet FNMA and FHLMC underwriting standards.

The Subprime and Alt-A markets emerged as these Wall Street conduits developed a larger appetite for non-conforming mortgage product. As various petroleum exporting countries and national sovereign wealth funds accumulated dollars due to the balance of payments imbalance, these funds needed a place to INVEST their dollars. Wall Street encouraged them to invest in mortgage securities and mortgage derivatives. Wall Street also sold this paper to many commercial banks and various other institutional investors.

A sale to the private conduits tends to be a little different than the sale to the GSEs. The private conduits tended to work on an epic scale and therefore tended to only buy the production of larger enterprises. These enterprises often gathered and aggregated mortgage debt through both corresponding activities (Step 0) and whole loan purchases (Step 1, Variant B).

The larger entities typically SOLD their production to a bankruptcy remote corporate affiilate. For example, New Century Mortgage sold its production to NC Capital Corporation (The “A” to “B” transaction).

In turn, these aggregating affiiliates would accumulate a vast pool of mortgage debt and then sell it to a Wall Street aggregator. These aggregators tend to have names like “Morgan Stanley Mortgage Capital, Inc.” (the “B” to “C” transaction).

The Wall Street investment banking concern would then prepare a registration statement for a securitization. Most of the time, there was a preliminary registration statement and then a supplemental registration statement that had the specific detailed quantative information about the mortgages going into the pool.

Each of these trusts typically called for the Wall Street investment bank’s aggregator to act as the “depositor” for a trust that was stood up as of the closing date set forth in the registration statement. Upon that closing, the aggregator sold or exchanged the mortgages to the institutional trustee for the trust being created (e.g. Deutsche Bank).

Upon closing, the Wall Street aggregator would deliver the promissory notes OR the custodial receipts for these promissory notes to the institutional trustee (the “C” to “D” transaction). In turn, the institutional trustee would issue trust certificates with characteristics and rights as set forth in the trust indenture and the registration statement. The registration statement would also specify the identity of the institutional custodian and the master servicer. The institutional custodian would then hold the promissory notes and the master servicer would handle the borrower interactions, servicing these loans.

Note that in this variant, the ownership of the promissory notes shifts from A to B to C to D. Negotiation of a promissory note is by endoresment and delivery. Since ALL of the notes are endorsed in BLANK, negotiation is by PHYSICAL DELIVERY. So the promisssory notes OR custodial receipts evidencing and entitling the holder to custody rights must be transferred from A to B to C to D to effect this type of transaction.

Also, under the statutes of frauds of most states, a written assignment from A to B to C to D is also required.

The Location of the Promissory Note Under Routine Servicing
The vast bulk of new mortgage originations are handled using variants C (GSE) and D (private conduits). Note that in EITHER instance, the promissory note is NOT typically in the hands of the servicer. Neither is it in the hands of either the GSE or the institutional trustee. The promissory note is in the hands of the institutional custodian.

Because the promissory note is endorsed IN BLANK, it is a negotiable bearer intrument. It is like holding a BLANK CHECK (which is also a negotiable bearer instrument).

Accordingly, the institutional investors and the custodians GET NERVOUS about having these outside of their vaults.

When a Default and Foreclosure Take Place
When a mortgage goes into default (or when a servicer PRECIPITATES a default by fraud), the servicer typically orchestrates the foreclosure. But very often the servicer does this by engaging the servicers of national “foreclosure specialists”, such as Fidelity, FANDO, and or NDex. These institutional “foreclosure specialists” take charge and call the shots.

There is also some indication that some foreclosure specialists and/or servicers begin fabricating documents in support of the foreclosure.

Bear in mind that the Servicer is SELDOM the owner of the mortgage debt except in variant “A” or “B” where whole loan ARMs are held by depository institutions. (The portfolio loans are mostly Treasury Indexed or Cost of Funds Indexed. The LIBOR indexed ARMs are mostly for securitization and sale to foreign investors.)

As explained above, the servicer is also not typically the HOLDER of the promissory note.

But servicers are in a hurry to initiate foreclosure and rely upon the fact that most borrowers do NOT defend against the foreclosure suit. So the servicer never bothers to obtain the promissory note before initiating foreclosure.

Instead, they simply rely upon fabricated documents and false and perjured affidavits as evidence in their premature foreclosures.

Federal standing rules require that a plaintiff have a pecuniary interest in the subject matter of the suit.

The Promissory Note as Evidence
One of the problems presented by this process is that even when a plaintiff appears in court with a promissory note, the promissory does NOT actually show WHEN a particular entity came into ownership OR custody of the promissory note.

As explained above, ENDORSEMENT — like your endorsement on a check — is UNDATED. And there is NO INDICATION on the promissory note as to the date of DELIVERY or of any negotiation or exchange of the promissory note by DELIVERY of the promisrry note endorsed in BLANK.

Once upon a time, many whole loan assignments were RECORDED. Moreover, the GSEs were pretty good about INSISTING that mortgages sold to the GSEs were assigned in favor of the GSEs, even if this assignment was never recorded.

But in the rush to securitization, the subprime lenders and the Wall Street investment banking concerns GOT GREEDY and cut a few corners. One of the corners they often cut was the creation of contemporaneous A to B, B to C and C to D assignments.

While the ENDORSEMENTS were UNDATED, the assignments traditionally were not only DATED, but also NOTARIZED to assure that the assignment was eligible for recording in the public land records for a county. So the assignment has often been the BEST EVIDENCE as to the date that a transaction took place.

But when the assignment was NOT properly executed, the mortgage investor is WITHOUT good evidence as to the DATE each transaction took place.

To overcome this problem, some mortgage servicers, “foreclosure specialists” and/or their law firms have been engaging in fabrication of assignments to use in support of their foreclosure suits. These fabrications can be readily identified and PROVEN by those experienced in mortgage practice.

Aggressive discovery is a big help in detecting and PROVING evidence fabrication.

Who Owns the Promissory Note and Who Owns the Securities?
The question as to WHO owns the promissory note is one that actually doesn’t necessarily have to be answered, though you need to aggressively press for an answer in discovery. It is the PLAINTIFF’s burden of proof to demonstrate standing and authority to institute the foreclosure suit.

You need to learn the identity of the holder primarily to DEFEAT the allegations and assertions of the plaintiff.

The ownership of the underlying mortgage securities is COMPLETELY irrelevant. Owners of the mortgage securities issued by a trust do NOT have the authority to foreclose. The institutional trustee acts on behalf of the holders of the trust certificates. That is how a trust works. But the trust cannot act without proving that it is either the owner or the holder of the promissory note.

Bear in mind that the institutional custodian typically has the promissory note. The servicer is orchestrating the foreclosure, usually through a foreclosure specialist. The institutional trustee acting on behalf of the mortgage trust is very passive in this process EXCEPT as regards interactions with the certificate holders. The institutional trustee is usually the owner. The custodian is the holder. The servicer is neither the owner nor the holder.

In a contested foreclosure case, the servicer will usually ultimately locate and obtain the promissory note. But this usually doesn’t happen until AFTER the institution of the suit. The servicer will then seek to use fabricated evidence or perjured affidavits to PROVE that it was the holder at the institution of the suit.

Similarly, the servicer often causes the creation of a fabricated assignment.

Aggressive discovery can often PROVE that allegations made in the servicer’s pleadings are false, that affidavits contain false and perjured statements and that evidence presented to the court has been fabricated.

Information Links

Promissory Note Discovery

Rescind Your Mortgage

Truth In Lending Act – PDF

Mortgage Forgiveness Debt Relief

Foreclosure Dismissal

RESPA ACT – Loan Regulations

Foreclosure Prevention Act of 2008

Foreclosure Counseling Assistance

Basic Counseling Qualifications for Stopping Foreclosure

Remember, not all options will apply to everyone. Each homeowner will have a unique set of circumstances. It is very important that an assessment of your current crisis situation be performed before we can find the right solution for you.

Below, you’ll find a list of questions that will help us determine the best option for you.

• Is your mortgage payment 1 to 15 months behind?
• Are you able to make your regular mortgage payment now?
• Can you make your regular mortgage payments consecutively?
• Are you currently living in your home?
• Have you recovered from the financial hardship that caused you to get behind?

If you answered “YES” to the above questions, you may qualify for Mortgage Counseling Assistance.

Call Us Now 407.366.3999

Our Guarantee – We are here to coach you to get back on your feet with-out loosing your greatest asset – YOUR HOME.

KEY REASON as a non profit foreclosure prevention counseling organization: we provide foreclosure counseling, and hands on assistance in dealing with your lender, bank and investor properly and most of all, successfully.

The Second Key Reason is this: We ARE NOT & DO NOT work with ANY individuals or businesses that buy ANY portion of their clients real estate assets as part of their “counseling options”.

This is Our Guarantee, and it is this simple. If you are willing to work hand in hand with us, you have a wonderful chance to get back on your feet and successfully keep and retain your home ownership.

H.R. 3221: Foreclosure Prevention Act of 2008 became law on 7/30/2008 signed by presidential order.

Mortgage Payments Sending You Reeling? Here’s What to Do

The possibility of losing your home because you can’t make the mortgage payments can be terrifying. Perhaps you are one of the many consumers who took out a mortgage that had a fixed rate for the first two or three years and then had an adjustable rate. Or maybe you’re anticipating an adjustment, and want to know what your payments will be and whether you’ll be able to make them. Or maybe you’re having trouble making ends meet because of an unrelated financial crisis.

Regardless of the reason for your mortgage anxiety, the Federal Trade Commission (FTC), the nation’s consumer protection agency, wants you to know how to help save your home, and how to recognize and avoid foreclosure scams.

Know Your Mortgage

Do you know what kind of mortgage you have? Do you know whether your payments are going to increase? If you can’t tell by reading the mortgage documents you received at settlement, contact your loan servicer and ask. A loan servicer is responsible for collecting your monthly loan payments and crediting your account.

Here are some examples of types of mortgages:

• Hybrid Adjustable Rate Mortgages (ARMs): Mortgages that have fixed payments for a few years, and then turn into adjustable loans. Some are called 2/28 or 3/27 hybrid ARMs: the first number refers to the years the loan has a fixed rate and the second number refers to the years the loan has an adjustable rate. Others are 5/1 or 3/1 hybrid ARMs: the first number refers to the years the loan has a fixed rate, and the second number refers to how often the rate changes. In a 3/1 hybrid ARM, for example, the interest rate is fixed for three years, then adjusts every year thereafter.
• ARMs: Mortgages that have adjustable rates from the start, which means your payments change over time.
• Fixed Rate Mortgages: Mortgages where the rate is fixed for the life of the loan; the only change in your payment would result from changes in your taxes and insurance if you have an escrow account with your loan servicer.

If you have a hybrid ARM or an ARM and the payments will increase — and you have trouble making the increased payments, find out if you can refinance to a fixed-rate loan. Review your contract first, checking for prepayment penalties. Many ARMs carry prepayment penalties that force borrowers to come up with thousands of dollars if they decide to refinance within the first few years of the loan. If you’re planning to sell soon after your adjustment, refinancing may not be worth the cost. But if you’re planning to stay in your home for a while, a fixed-rate mortgage might be the way to go. Online calculators can help you determine your costs and payments.

If You Are Behind On Your Payments

If you are having trouble making your payments, contact your loan servicer to discuss your options as early as you can. Most loan servicers are willing to work with customers they believe are acting in good faith, and those who call them early on. The longer you wait to call, the fewer options you will have. After you’ve missed three or four payments and your loan is in default, most loan servicers won’t accept a partial payment of what you owe. They will start foreclosure unless you can come up with the money to cover all your missed payments, plus any late fees.

Avoiding Default and Foreclosure

If you have fallen behind on your payments, consider discussing the following foreclosure prevention options with your loan servicer:

Reinstatement: You pay the loan servicer the entire past-due amount, plus any late fees or penalties, by a date you both agree to. This option may be appropriate if your problem paying your mortgage is temporary.

Repayment plan: Your servicer gives you a fixed amount of time to repay the amount you are behind by adding a portion of what is past due to your regular payment. This option may be appropriate if you’ve missed only a small number of payments.

Forbearance: Your mortgage payments are reduced or suspended for a period you and your servicer agree to. At the end of that time, you resume making your regular payments as well as a lump sum payment or additional partial payments for a number of months to bring the loan current. Forbearance may be an option if your income is reduced temporarily (for example, you are on disability leave from a job, and you expect to go back to your full time position shortly). Forbearance isn’t going to help you if you’re in a home you can’t afford.

Loan modification: You and your loan servicer agree to permanently change one or more of the terms of the mortgage contract to make your payments more manageable for you. Modifications can include lowering the interest rate, extending the term of the loan, or adding missed payments to the loan balance. A loan modification may be necessary if you are facing a long-term reduction in your income.

Before you ask for forbearance or a loan modification, be prepared to show that you are making a good-faith effort to pay your mortgage. For example, if you can show that you’ve reduced other expenses, your loan servicer may be more likely to negotiate with you.

Selling your home: Depending on the real estate market in your area, selling your home may provide the funds you need to pay off your current mortgage debt in full.

Bankruptcy: Personal bankruptcy generally is considered the debt management option of last resort because the results are long-lasting and far-reaching. A bankruptcy stays on your credit report for 10 years, and can make it difficult to obtain credit, buy another home, get life insurance, or sometimes, even get a job. Still, it is a legal procedure that can offer a fresh start for people who can’t satisfy their debts.

If you and your loan servicer cannot agree on a repayment plan or other remedy, you may want to investigate filing Chapter 13 bankruptcy. If you have a regular income, Chapter 13 may allow you to keep property, like a mortgaged house or car, that you might otherwise lose. In Chapter 13, the court approves a repayment plan that allows you to use your future income toward payment of your debts during a three-to-five-year period, rather than surrender the property. After you have made all the payments under the plan, you receive a discharge of certain debts.

Contacting Your Loan Servicer

Before you have any conversation with your loan servicer, prepare. Record your income and expenses, and calculate the equity in your home. To calculate the equity, estimate the market value less the balance of your first and any second mortgage or home equity loan. Then, write down the answers to the following questions:

• What happened to make you miss your mortgage payment(s)? Do you have any documents to back up your explanation for falling behind? How have you tried to resolve the problem?
• Is your problem temporary, long-term, or permanent? What changes in your situation do you see in the short term, and in the long term? What other financial issues may be stopping you from getting back on track with your mortgage?
• What would you like to see happen? Do you want to keep the home? What type of payment arrangement would be feasible for you?

Throughout the foreclosure prevention process:

• Keep notes of all your communications with the servicer, including date and time of contact, the nature of the contact (face-to-face, by phone, email, fax or postal mail), the name of the representative, and the outcome.
• Follow up any oral requests you make with a letter to the servicer. Send your letter by certified mail, “return receipt requested,” so you can document what the servicer received. Keep copies of your letter and any enclosures.
• Meet all deadlines the servicer gives you.
• Stay in your home during the process, since you may not qualify for certain types of assistance if you move out. Renting your home will change it from a primary residence to an investment property. Most likely, it will disqualify you for any additional “workout” assistance from the servicer. If you choose this route, be sure the rental income is enough to help you get and keep your loan current.

Consider Giving Up Your Home Without Foreclosure

Not every situation can be resolved through your loan servicer’s foreclosure prevention programs. If you’re not able to keep your home, or if you don’t want to keep it, consider:

Selling Your House: Your servicers might postpone foreclosure proceedings if you have a pending sales contract or if you put your home on the market. This approach works if proceeds from the sale can pay off the entire loan balance plus the expenses connected to selling the home (for example, real estate agent fees). Such a sale also would allow you to avoid late and legal fees and damage to your credit rating, and protect your equity in the property.

Short Sale: Your servicers may allow you to sell the home yourself before it forecloses on the property, agreeing to forgive any shortfall between the sale price and the mortgage balance. This approach avoids a damaging foreclosure entry on your credit report. You still may face a tax liability on the amount of debt forgiven. Consider consulting a financial advisor, accountant, or attorney for more information.

Deed in Lieu of Foreclosure: You voluntarily transfer your property title to the servicers (with the servicer’s agreement) in exchange for cancellation of the remainder of your debt. Though you lose the home, a deed in lieu of foreclosure can be less damaging to your credit than a foreclosure. You will lose any equity in the property, and you may face an income tax liability on the amount of debt forgiven. A deed in lieu may not be an option for you if other loans or obligations are secured by the property on your home.

Housing and Credit Counseling

You don’t have to go through the foreclosure prevention process alone. A counselor with a housing counseling agency can assess your situation, answer your questions, go over your options, prioritize your debts, and help you prepare for discussions with your loan servicer. Housing counseling services usually are free or low cost.

More Links of Similar Interest to Foreclosure Assistance:

Mortgage Forgiveness Debt Relief Act of 2007

Truth In Lending Act

Rescind Your Mortgage Loan and Save Your Home From Foreclosure

Fight Your Foreclosure: Make Them Produce The Original Promissory Note

RESPA ACT – Loan Regulations Servicing Guidelines

American Housing Rescue and Foreclosure Prevention Act of 2008: H.R. 3221

Foreclosure Dismissal